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TMI Blog2021 (11) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... eek a direction to respondent No. 3 concerning the matter. As per respondent No. 3 a forensic auditor was appointed to look into the transactions of the corporate debtor and certain transactions of the corporate debtor were found to be questionable and the same are pending consideration before this Tribunal - The CoC is aware of the proposed sale of the land for ₹ 2.25 crores in the year 2010. No member of the CoC has questioned the propriety of the consideration. In the absence of any material the allegation of undervaluation cannot be accepted, for the limited purpose of this application. This application is found to be frivolous and without any merits - application dismissed. - I. A. No. 734/MB/2021 in C. P. (IB) No. 1399/MB/2017 - - - Dated:- 19-5-2021 - Janab Mohammed Ajmal (Judicial Member) And V. Nallasenapathy (Technical Member) For the Applicant : Amrut Joshi with Nikhil Mishra , Ranjit Agashe , Niranjan Karmarkar and Prakhar Tandon instructed by Sudha Dwivedi and Associates For the Respondents Nos. 1 and 5 to 19 : Gaurav Joshi , Senior Counsel, with Associates For the Respondents Nos. 2 and 3 : Ms. Pooja Mahajan , with Associates For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the corporate debtor, with effect from January 30, 2019. (d) The applicant on analysis of various records of respondent No. 2 found that some potentially related party transactions were entered into by the corporate debtor and the promoters and directors of the new resolution applicant. (e) Due to concealment of various facts, information and data by the RP and CoC, the applicant without prejudice to its rights expressed no objection when this Tribunal allowed withdrawal of the resolution plan. Even after the withdrawal of the plan, the CoC failed to refund ₹ 93.80 crores infused by the applicant as per the resolution plan, for which an application bearing I. A. No. 443 of 2021 taken out by the applicant is pending for consideration. (f) Respondent No. 4 submitted a resolution plan before the CoC and the same was approved by the CoC with requisite majority. An application bearing I. A. No. 19 of 2021 for approval of the resolution plan has been heard by this Tribunal and pending for orders. (g) The following is the list of directors of the new resolution applicant/DLH : DIN/PAN Name Begin date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease cum sale agreement dated June 23, 2008 (wrongly mentioned as memorandum of understanding in the application), between the corporate debtor and the KIADB. The value of the land was approximately ₹ 25 crores at that time and the land has been sold by respondent No. 2 to the promoters of the new resolution applicant, i. e., BRFL at an undervalued price and attracts section 45 of the Insolvency and Bankruptcy Code, 2016 (the Code). (l) Respondent No. 3 being aware about the facts should have filed appropriate applications under sections 43, 45, 49 and 66 and other relevant provisions of the Code. The omission on the part of respondent No. 3 to file such applications shows her mala fide conduct and that respondent No. 3 was hand in glove with the erstwhile directors of respondent No. 2 only to help respondent No. 4. It attracts the provisions of section 43 of the Code as the same amounts to a preferential transaction. (m) The transaction was fraudulently carried out to defraud the creditors of respondent No. 2 and hence section 66 of the Code also gets attracted. Accordingly, the respondents are liable to make contributions to the assets of the corporate debtor. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 seeking leave to revise his offer/bid and to reduce the same from what was stated in the approved resolution plan. The CoC filed an application bearing M. A. No. 2326 of 2019 against the applicant to implement the resolution plan without any modifications or deviations. Alternatively, the CoC prayed for the recommencement of the corporate insolvency resolution process (CIRP) of the corporate debtor and for permission to invite fresh bids with the aim of reviving the corporate debtor as a going concern and to prevent it from going into liquidation. Apparently M. A. No. 2223 of 2019 is pending and M. A. No. 2326 of 2019 has been partly allowed as per order dated February 5, 2020. (D) The applicant also filed an amendment application seeking set ting aside/recall of the order of approval of the resolution plan dated November 30, 2018 and also expressed that the applicant had no objection to handover the possession of the corporate debtor back to the CoC without prejudice to its rights and contentions. Thereafter this Adjudicating Authority vide order dated December 5, 2019 as an interim measure handed over the possession of the corporate debtor to the CoC and CIRP of the corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant has come up with this application questioning the eligibility of respondent No. 4 under section 29A of the Code without demonstrating the reasons therefor. (K) The so-called transaction dates back to 2010, beyond the time period required for the RP to take any action under section 43 or related sections. Therefore, the insinuation against the RP by the applicant in that regard is ill founded. (L) An application under above referred sections for avoidance trans action in accordance with Chapter III of the Code have to be filed after arriving at an opinion by the RP. Neither the Code nor the Regulations envisage any role for third party like the applicant in making such determination or filing such application in respect of avoidance transactions. (M) The corporate debtor had, during the CIRP-1, entered into certain avoidable transactions as is revealed from the forensic audit report dated June 22, 2018, submitted by M/s. T. R. Chaddha and Co. Accordingly respondent No. 3 has filed application bearing M. A. No. 690 of 2018 under sections 66 and 67 of the Code. On October 22, 2018 respondent No. 3 filed another application bearing M. A. No. 1254 of 2018, under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occupy the land situated at Doddaballapur, Bengaluru and further requested the RP/CoC to assist in execution of the transfer of the aforesaid land to BRFL. Notably, on perusal of the documents shared by BRFL, it appears that FTL had agreed to complete the transfer of the said land to BRFL. Further, as per the draft sale deed dated June 14, 2019 (at which time, FTL was in management and control of the corporate debtor), it appears that KIADB had agreed to transfer the aforesaid land in favour of the corporate debtor. (iv) As per letter dated May 14, 2019 KIADB raised demand against the corporate debtor to deposit ₹ 76.63 lakhs towards cost difference of land and other outstanding dues for transferring the said land in favour of the corporate debtor. The corporate debtor is in possession of a receipt dis closing payment of the amount. Copy of letter dated May 14, 2019 sent by KIADB to the corporate debtor and copy of KIADB receipt are annexed and marked as annexures 6 and 7 respectively. (v) Since the appointment of RP post restoration of CIRP, the RP has written to the KIADB authorities to provide the application submitted by FTL to KIADB for execution of the sale deed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration formalities of the said land can be completed within a year, co-terminous with the implementation of its resolution plan. (P) It is submitted that during the CIRP-1, when the applicant was in management and control of the corporate debtor, the applicant itself agreed to complete the transfer of said land to BRFL. Surprisingly the applicant is now questioning the same transaction in this application, trying to blow hot and cold at the same time. It is submitted that DLH and BRFL are not related parties. At some point in the past they both were associated with the entity called BAPL. As per the latest financials of BAPL and DLH, BRFL is not a related party to either of them. 4. The new resolution applicant (respondent No. 4) contended as below : (A) The application bearing I. A. No. 19 of 2021 for approval of the resolution plan is reserved for orders. Any delay in the approval of the resolution plan would cause severe prejudice to respondent No. 4 and successful resolution of the corporate debtor. (B) The applicant does not have any locus standi to file this application. Ingredients of section 29A of the Code, as alleged in the application, are not made out ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer is beyond the look back period stipulated under section 43(4) of the Code and hence cannot be impugned as such. (H) In any event and without prejudice, section 43(2) of the Code lays down twin considerations which need to be proved for a transaction to be considered as a preferential transaction. First, a transfer of a property or interest therein of the corporate debtor is made for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor. Second, such transfer should have the effect of putting such creditor or a surety or a guarantor, in whose favour the transfer is made, in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53 of the Code. An exception to the second condition is where such a transfer is made in the ordinary course of business or financial affairs of the corporate debtor or the transferee. The applicant has failed to satisfy these ingredients. (I) The applicant failed to produce any particulars or document which would substantiate that the impugned transfer could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land cost and other charges. The corporate debtor vide letter dated May 23, 2019 addressed to KIADB stating therein that it is agreeable to the sale of the land to BRFL/respondent No. 21. From the above it is clear that KIADB has no objection for sale of the land by the corporate debtor to BRFL/ respondent No. 21. (d) With the above facts let us examine the applicability of various provisions of the Code as alleged by the applicant. (e) Section 47 of the Code provides as below : 47. Application by creditor in cases of undervalued transactions.-(1) Where an undervalued transaction has taken place and the liquidator or the resolution professional as the case may be, has not reported it to the Adjudicating Authority, a creditor, member or a partner of a corporate debtor, as the case may be, may make an application to the Adjudicating Authority to declare such transactions void and reverse their effect in accordance with this Chapter. (2) Where, the Adjudicating Authority, after examination of the application made under sub-section (1), is satisfied that- (a) undervalued transactions had occurred ; and (b) liquidator or the resolution professional, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor ; and (b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53. (3) For the purposes of sub-section (2), a preference shall not include the following transfers- (a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee ; (b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that- (i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest, and was used by corporate debtor to acquire such property ; and (ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property : Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. (2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit, if- (a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reason able prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor ; and (b) such director or partner did not exercise due diligence in mini mising the potential loss to the creditors of the corporate debtor. (3) Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under sub-section (2), in respect of such default against which initiation of corporate insolvency resolution ..... 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